How/when are ETF expense fees applied?

Question

I'm new to Exchange Traded Funds. I see that many ETFs have an expense ratio. I understand that I'll pay transaction fees but am not clear how the expense fees are applied.

Answer 1

Expenses are automatically deducted from dividends, or, if necessary, the NAV.

Answer 2

An ETF is much like common stock.  You pay a standard commission when you buy and sell.  That is the only time you see a specific fee.

If a fund has a 1% expense ratio, each year they take 1% out of the fund.  Your individual account is not touched, but the value of your shares go down slightly, as the whole fund is now worth 1% less.

Answer 3

Expenses, including the management fee, are computed daily and paid monthly.  The expenses accrued but not yet paid are a liability to the fund until paid.  Once a month the fund cuts a check to the management company.  The NAV is calculated by:

(Fund assets - Fund liabilities) / Number of Shares Outstanding